Real Estate Innovation

Avoiding Car Insurance Claims, From Being Declined

Some time ago it was feasible to for an insurance company to pay a motor claim that would have otherwise been declined, simply because the claimant had been a long term and loyal client to the company. Even today it is not inconceivable that an insurance company will make a decision to pay a claim on commercial grounds, for example where the claimant is a very major and highly profitable client. However the days of paying out a claim in order to treat a long-term client decently, are long gone and many clients risk having claims declined.

Although it is not widely known, most contract hire companies have a form of fall back insurance for their contract hire vehicles; this can covers them if the hirer has an accident and their insurer refuses to pay out. Of course the contract hire company will then hold the hirer liable for any loss, but on occasions the hirer is a limited company that subsequently goes into liquidation. If there are no personal guarantees in place then the contract hire company has no means of recovering its money other than to claim on their own insurance. Nowadays contract hire companies are seeing an increasing number of cases where claims are being repudiated. The more serious the accident, the more closely the insurance company will investigate a claim. After all they have to look after their shareholders interests, paying claims where the insurer or driver have not complied with the terms and conditions of the insurance, is not looking after the shareholders interests.

A motor insurance company’s terms and conditions will normally state that a vehicle should comply with the manufacturer’s specifications; if the vehicle is modified by the driver it is essential to inform the insurance company, otherwise it can invalidate the insurance. For this reason it is always advisable to fit the manufacturer’s recommended tyres. It is important to advise employees that they must not make any changes to their company vehicle. It has been known for employees to do what is called “chip” the engine of their company vehicle. This increases the power of the engine and could, if they had not been notified, give an insurer a very valid reason for refusing pay out on a claim. It is worth bearing in mind that this can also invalidate the manufacturer’s warranty and potentially cause a problem with the contract hire company; a vehicle without a manufacturers warranty does not have the same value as one that does.

The vehicle must also be roadworthy to comply with the insurance company’s terms and conditions. Contract hire vehicles, as most company car are nowadays, are generally relatively new and regularly serviced. If however a company runs its own vehicles and keeps them for perhaps four or five years, then the condition of the cars needs to be monitored more closely, particularly if they are doing high mileage.

It is not only lack of maintenance that can cause a vehicle to be un roadworthy, it can often be a failing on the part of the driver; incorrect tyre pressure is the most common reason. Driving with the tyres incorrectly inflated can be very dangerous, particularly if the roads are wet. If one of the company vehicles is in an accident and the accident is of a serious nature, then the insurance company will normally check the vehicle’s roadworthiness. Of course if another motorist were clearly at fault then the insurer would have no reason to check the condition of the vehicle.

If it is the case that the employee’s actions have clearly caused an accident, perhaps where they have lost control on a corner or failed to brake in time, then it is quite possible that the insurance company may want to inspect the vehicle, to satisfy itself that the car is in a roadworthy condition. It is not uncommon to find that company car drivers have incorrectly inflated tyres, or just neglected to check them. It is important that employees are made aware of this danger, recommending them to check their tyre pressure, when the tyres are cold, at least every two weeks. This will also help reduce the company’s overall fuel consumption.

It is also important that tyre wear is regularly monitored to ensure that tyres do not go below the legal limit; with servicing intervals at 18,000 miles and more, one cannot rely on being advised during servicing, that it is necessary to consider changing tyres. Having tyres that are below the legal limit is not maintaining a car in a roadworthy condition. Sometimes only part of the tyre is worn; running the car with the incorrect tyre pressure can cause this.

A risk to the company’s insurance cover that is often overlooked by companies is when employees drive their company cars whilst having exceeded the legal limit of alcohol consumption. The risk is higher outside of office hours, when employees stop for a drink on their way home, or at weekends. Whilst it may be outside office hours, it is still the company’s vehicle and insurance. It was revealed in a study in 1998 that in 10% of motorcycle accidents where there was a fatality and 19% of fatal car accidents, alcohol was involved. It seems extraordinary that even today with all the increased publicity, there are drivers who believe their driving skills are enhanced following alcohol consumption.

Companies should also be aware that if an employee drives his company car and has an accident whilst under the influence of drugs, the company could also find itself without insurance. Unfortunately there are also prescription drugs that can affect the ability to drive safely. It is however an employer’s responsibility to ensure the safety of its employees; it may be safer for an employee to ask its employees to advise them if they are taking a medicine that may affect their driving ability, after all many drugs companies advise the user not to operate machinery, or drive whilst taking a particular medication.

Another risk is when the insurance company believe that a loss has been caused by negligence on the part of the driver. An example of this would be where an employee has left his car, either on the drive or in the road, with the engine running; many do this in the winter so that when they get into the car, it is already heated up. If an employee does this, or leaves the keys in the car when at the petrol station and an opportunistic thief jumps in and drives off, the insurance company is unlikely to pay out.

If the company vehicles are to be insured whilst on the road, the driver must have a valid driving licence. There are many employers that believe that taking a photocopy of an employee’s driving licence is all that is necessary. Some have never seen the original and accept a photocopy provided by the employee, only to discover following an accident, that the employee had been previously disqualified.

If a company’s vehicles are sourced through a broker, the larger and well established contract hire brokers are able to offer a service where they regularly check the employee’s driving licences. They can be checked when they are first employed and then at regular intervals, to make sure there are no new convictions. Once employees are aware this system is in place they are much more likely to come forward and declare a new conviction. Apart from protecting the company as far as it’s insurance is concerned; it also affords it protection from prosecution under the new legislation.

If an insurer refuses to pay out on a claim, one should not be necessarily assume that they are correct in doing so. There is the Financial Ombudsman that will deal with any complaints or disputes in this respect. In a case we are aware of, one of our clients had his vehicle carjacked, the insurance company refused to pay out the claim of 60,000, because they said that they had written to him on a number of occasions telling him that he must fit Tracker to the vehicle, which he had not done. They argued that had tracker been fitted, the vehicle might have been recovered. However when an expert was called in on behalf of the client, things changed. Our understanding is that the expert stated that whilst the insurer had indeed written to the client with regard to Tracker, they had not at any time told him he would be uninsured without it. The claim was settled.

To summarise, it is important to ensure that vehicles are properly maintained and that tyres are regularly checked for wear and the pressures should be checked ideally every two weeks. Employees should be prohibited from making any modification to their company vehicle and should heed any warning lights that come up on the screen of their vehicle. They should also be warned about driving whilst under the influence of alcohol or drugs and encouraged to speak to the company if they are on any type of medication that may affect their ability to drive safely. Vehicles should not be started and left to warm up on a cold day and keys should not be left in the car whilst in a petrol station or whilst quickly popping into the shops. Opportunistic thieves only take seconds to steal a car. Speak to a contract hire broker, about licence checking, it is vital that all companies have these checks carried out. The aforementioned will at least go some way, to avoiding a situation where an insurer refuses to pay out on a claim.

Very often when motor insurance claims are declined, the insurer claims that the driver has been negligent. Some employers, perhaps with justification, worry that company car drivers are more prone to be negligent with the company car than they would perhaps with their own vehicle. It seems that negligence is a factor in accident claims not being paid, throughout the world; following an accident in America the insurer refused to pay a claim for accident that happened when the owner of a new motorhome thought the vehicle would drive itself after he had switched to cruise control. This did not stop him taking legal action against the manufacturer of the motorhome claiming that they should have told him that cruise control didn’t encompass steering, braking and knowing where to go etc. Common sense does not appear to be a factor in the American legal system; he won his case.